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UAE banks not lending enough to support demand

January 22, 2014

UAE banks are not lending enough to support demand from end users looking to get on the property ladder, according to a director of the board at the Gulf state's central bank, despite recent measures intended to avoid a credit binge similar to that which precipitated the country's 2009 financial crisis, Arabian Business reported. Property prices in the UAE , particularly in Dubai , have soared by more than 20 percent in some cases in the last 12 months, prompting some industry watchers to express concerns that the sector could be entering a bubble similar to that witnessed prior to the market's collapse three years ago. In an attempt to curb speculation and prevent the market overheating, the UAE's Central Bank has introduced measures including a doubling in transaction fees to 4 percent and a cap on mortgage lending to both citizens and expatriates. However, UAE Central Bank director Hamad Buamim believes that the country's financial sector is still too reticent to lend to home buyers, with current price rises being fuelled by cash buyers. "We're not at the stage in 2007 when the banks were over lending, I think we have the other way around," Buamim told a press conference in Dubai . "Many banks were not lending for the last couple of years, and with regulation it is important to understand that it's OK to lend. "We want the banks to lend for real estate. We don't want them to lend to speculators, we want them to lend to real users, to businesses and to consumers. This is very important for the whole cycle of the economy," he said. Buamim added that much of the transaction activity in the local real estate market was cash based and "not really supported by banks". According to real estate intelligence provider , residential mortgage lending in Dubai totalled AED12.76bn ( $3.46bn ) last year, compared to overall residential sales transactions of AED30.87bn. Earlier this month, Dubai Land Department director general Sultan Butti Bin Merjen said real estate prices in the emirate could rise by as much as 40 percent this year. He said in an interview with Bloomberg that the department planned to introduce new rules to control speculation on properties sold before they were built in response to property prices increasing more than 30 percent in 2013. The Land Department also said this month that it was updating its rental price index, which determined caps on increases depending on the type and location of the property.; All Rights Reserved - Mubasher Info

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Source: Mubasher (Saudi Arabic)

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